Contract Finalisation
Having been notified of success, Ellipsis can undertake a review of the proposed contract documents to ensure that they incorporate all the changes generated by the Tender Query process and that no clauses have been unexpectedly modified providing you with certainty prior to execution.
Ellipsis coordinate and work with the appropriate representatives of your company, to identify the steps that need to be taken in order to comply with the requirements of any contract review checking what signature authority policies and procedures that have been established by the company.
Requirements should be written into tender documentation/contracts in as much detail and as specifically as possible including engagement requirements, data environment and any standardisation of equipment or product that the client requires. This helps the process when the Contracts are eventually to be finalised as the definition is important to understand the contractual obligations and what has been committed to be delivered.
Contract Review
A contract review is needed to ensure a thorough examination of a legal agreement before it is signed to confirm that everything stated in the document is clear and accurate and reflects the terms under which you submitted your tender, and that your company is comfortable moving forward according to the terms of the agreement.
After the agreement has been executed (signed), contract reviews are also important leading up to specific contracting events, such as scope changes and variations negotiation or opt-out windows. A final contract review is critical as it is typically your last opportunity to identify, and request needed changes before getting locked into an agreement.
There are no strict rules as to how to negotiate clauses to be included in the contracts however most client’s will be unlikely to entertain changes which were not identified during the tender process. It should also be noted that negotiations on pricing issues which could affect the outcome of the bidding process are generally prohibited, this is particularly the case in some overseas markets where the laws governing procurement are structured differently to the UK. Agreeing the day-to-day operational mechanisms for the contract should not be seen as negotiation, it is a housekeeping exercise which is essential to ensure the smooth running of the project, therefore key areas such as a detailed delivery plan, milestones, payment schedule, and reporting deadlines should routinely be discussed at this juncture.
Contract negotiation should begin with transparency and trust. Understanding the other party’s needs before the conversation simplifies the process and creates a strong foundation for a lasting relationship.
When Ellipsis International Solutions conducts a contract review, we find it is helpful to start with a plan so you can be sure that all areas of the contract have been carefully analysed. The object of the review is to identify any errors, discrepancies, concerns, or questions and enable you to resolve these to your satisfaction prior to execution of the contract.
Clarity, Unambiguous Language
As you read through a set of contract terms, pay close attention to how each sentence is structured and worded and look for any language that could be left up to interpretation. Even if both parties interpret unclear terms the same way, it is best to revise the language to remove the requirement for subjective interpretation if possible, this will help to prevent potential conflicts once the contract is signed and active.
Significant conflicts may require a third-party to determine next steps based on how they interpret the contract, so be sure all terms are laid out explicitly.
Default Terms
While both parties typically have good intentions when entering into a contract, there is always a possibility that things can go wrong and that one side fails to deliver according to the terms of the agreement, leading to a breach of contract.
It is important to understand the default clauses, damages, and remedies available to both parties, so you know the potential ramifications of not fulfilling the contract obligations and also what actions you can take should your client fail to meet their obligations.
Important Dates & Deadlines
In addition to ensuring that all of the dates and deliverables listed are in alignment with any previous tendered proposal or verbal agreements, the contract review stage is also an opportunity to start tracking anything your team or organisation is responsible for executing.
Proactive planning will help reduce the chances of a breach of contract, which could lead to significant consequences for your organisation.
Utilising a contract management software system like CEMAR can be extremely useful as this system will provide you with a simple Red, Amber, Green traffic light count down system as response timescales reduce to ensure that you are fully aware when a document or piece of correspondence needs to be submitted.
Key Clauses & Terms
Here are some of the key things the Ellipsis International Solutions’ specialist team look for during a contract review:
All clauses in a contract are important and need careful review, but some clauses are more significant than others. In general, ‘standard forms of contract’ are drafted to be relatively equitable to both parties, however by use of Additional (Z) Clauses these standard clauses can be significantly altered to change the balance of obligations, loading additional responsibility and risk onto one party. At tender stage understanding the impact of these changes it is essential, and post tender it is important to ensure that the original changes made to the contract have not been further modified, except as agreed in tender clarifications and queries.
Different companies and industries place more significance or importance on various facets of the Contract terms, so the most important contract terms are likely to vary as well, but some clauses require attention regardless of the sector. Terms like confidentiality, Intellectual Property (IPR), indemnity, termination, damages, liability, warranties, Parent Company Guarantees / performance bonds, and dispute resolution are all important sections in a contract and are worth spending extra time reviewing to fully ensure the language is acceptable.
Some clients will not accept any modifications to the contract terms. It is therefore essential to read and understand the ITT and contract early in the tender period to enable a decision to be made on whether this type of Contract and its terms will be acceptable, to prevent abortive costs from a lack of compliance leading to bid rejection.
Termination & Renewal Terms
Before signing any legally binding agreement, it is essential to confirm that you completely understand the contract’s termination clauses and any renewal terms in Framework and Term contracts to avoid getting locked into an agreement longer than you expected. You should check on things like automatic renewal language and opt-out windows so you know up front how and when you can cancel the agreement and what the repercussions are of not notifying the other party by a certain date.
Equally check for assignment clauses which enable your client to transfer you to a different part of his company or a completely different trading entity without any requirement to inform you. Provisions such as this should be challenged where possible to ensure that your position is protected.